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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






2. Ed > 1 - meaning consumers are price sensitive






3. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






4. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






5. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






6. The difference between total revenue and total explicit and implicit costs






7. A good for which higher income decreases demand






8. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






9. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






10. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






11. 0 < Ei < 1






12. The sum of consumer surplus and producer surplus






13. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






14. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






15. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






16. The imbalance between limited productive resources and unlimited human wants






17. Ed = (%dQd)/(%dP). Ignore negative sign






18. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






19. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






20. Two goods are consumer substitutes if they provide essentially the same utility to consumers






21. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






22. Models where firms are competitive rivals seeking to gain at the expense of their rivals






23. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






24. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






25. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






26. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






27. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






28. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






29. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






30. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






31. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






32. When firms focus their resources on production of goods for which they have comparative advantage






33. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






34. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






35. Total product divided by labor employed. APL = TPL/L






36. Ei = (%dQd good X)/(%d Income)






37. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






38. Ed = 8 - infinite change in demand to price change






39. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






40. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






41. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






42. Exists if a producer can produce a good at lower opportunity cost than all other producers






43. The difference between total revenue and total explicit costs






44. Ed = 0 - no response to price change






45. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






46. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






47. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






48. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






49. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






50. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus